People do not like spending cash anymore, instead they prefer the convenience of credit cards. Nowadays, even the cheapest items are settled with card transactions. If you are a mobile merchant, having the correct mobile credit card reader is extremely important when accepting credit card payments.
A recent study showed that 80% of customers preferred using their credit and debit cards to making payments with cash.
In contrast, a Gallup poll reported that only 24% of Americans made most or all of their purchases in cash.
Whether you own a sprawling business with 7 different retail outlets or you are a mobile merchant dog walker, masseuse or fitness instructor, the bottom line remains the same. “You need to be accepting credit card payments.”
You need to make it easy for your potential clients to pay you by providing a way to accept payments for your services. If you are a mobile merchant, having a mobile credit card reader app will do just that, “make things easy!”
A mobile credit card reader is a way of accepting credit card payments via a card payments app. It is a device connected to a smartphone or tablet that allows a customer to chip and tap a credit or debit card on either a phone or tablet to process payments.
Mobile card readers allow merchants to accept physical and non-physical card transactions by transforming everyday devices into mobile points of sale. Mobile credit card readers can also be used for paperless transactions where there is no need for a receipt printer.
Card Readers can usually be acquired at no cost and merchants are charged a small percentage rate and transaction fee for every transaction they make. In most instances, there are no additional monthly fees. On certain occasions, there might be additional transaction costs charges for American Express. Most readers work well with both Android and iOs based devices.
The first mobile card reader was created by Jim McKelvey and his friend, Jack Dorsey–one of the founders of Twitter.
Both friends had pitched the idea of a smartphone card reader to Silicon Valley investors after seeing small business owners get frustrated trying to accept card payments on the go.
This led to the creation of the Square—a small box plugged into the audio jack of a smartphone and a slot for swiping credit cards.
With a downloaded application, a smartphone could receive the embedded information of a card through the transmission of sound waves.
How Do Mobile Credit Card Readers Work
Older models of card readers required customers to physically write down the information from their cards.
Today’s mobile card readers do not even need Wi-Fi and transactions can be completed in a matter of seconds.
Mobile credit card readers work by pulling out information from a card, sending it to a payment processor for merchant services and extracting information from the bankcard of the paying customer.
Credit Card Processing in 3 Simple Steps
Once a customer makes a purchase with a card, the transaction is processed in 3 simple steps. Accepting credit card payments has never been easier.
- Payment Authorization: A customer swipes or scans a card with the mobile phone through a chip and swipe reader. The payment gateway then operates through a virtual terminal that safely passes the encoded data from the merchant bank to the customer’s bank.
The customer’s bank confirms if there is money available to complete the transaction. Once the process is completed, the bank marks the transaction as pending.
- Capture: The credit card company transfers the funds to the merchant bank account. Multiple payments can be transferred at the same time through a process known as batching.
- Settlement: Once funds are sorted they end up in the merchant or business owner’s account. This process usually takes a couple of business days depending on the payment gateway, payment processor and bank.
Types of Mobile Credit Card Readers
Below are 3 types of mobile credit card readers and how they process transactions.
A magstripe reader interprets the payment information located in the magnetic stripe of a physical credit or debit card when a customer swipes to make payment.
This information is not encrypted and can easily be stolen by scammers. A fraudster with only a card number can duplicate a card used with this reader easily.
These readers have been largely phased out. With many credit card companies now using EMV or chip cards and contactless payments.
EMV or Chip Card Readers
EMV or chip technology allows the acceptance of secure payments in either remote or same place environments. This is the worldwide standard in the credit card industry.
With this type of technology, a card is dipped or inserted, and not swiped. A purchaser then uses a PIN or signature to complete a transaction. This is much safer than using a magstripe card reader.
Contactless Card Readers
Contactless credit cards use RFID which stands for radio frequency identification. This technology utilizes radio waves to convey data over not too far distances.
With this type of card, purchasers simply wave or tap the card on the card reader for a transaction to go ahead.
Tokenization is another means of making contactless payment. The process uses randomly generated data (token) in place of sensitive banking information.
If fraudsters access the sensitive banking information of a cardholder, they would still need an encryption key to decipher the token (non-sensitive information). And this is virtually impossible for a hacker to access.
Thirdly, there are digital wallets and contactless payments like Apple Pay, Google Pay and Amazon Pay. These wallets allow individuals to digitally save payments in a well-protected environment and conduct transactions using a web portal or card reader.
These POS or Point of Sale apps are very convenient and cut down the amount of time customers spend on transactions. A customer only needs to wave a phone or smart watch at the POS system and the transaction is completed.
Magstripe, EMV or chip technology and radio frequency identification are the 3 major ways customer data can be transferred from a credit card processor to a merchant bank account.
However, these 3 types of card readers can also used via bluetooth. Bluetooth technology can be used for transactions too as long as the smartphone or tablet is not far away.
If a customer rushes into a shop, forgetting a wallet behind in the car, a bluetooth enabled reader allows that customer’s transaction to still go ahead.
Benefits of Having a Mobile Credit Card Reader
These are 6 reasons why a credit card reader is right for your mobile merchant business.
- Security: Cashless payments keep a business safe from robberies and theft.
- User-Friendly: Card readers with POS apps are easy to use. Payments are processed by using devices that we already own.
- Track & Record / Reporting: POS software track and record all card reader transactions. This saves plenty of time that would have been spent on bookkeeping.
- Fraud Prevention: Today’s card readers are more secure and harder for hackers and online criminals to crack.
- Convenience: Offering customers a quick way to make payments rather than hand pay with cash or wasting time counting small change is satisfying.
- Trust Building: The reputation of every business rests on safely handling customer transactions and card readers do just that.
Accepting Card Payments on Your Mobile Phone
Understanding this process helps you to select the right mobile card reader for your business. These steps include the following:
- Own a business: Mobile credit card payment providers need proof that you own a business, before using the service.
- Choose mobile device: You need at least one compatible mobile device before choosing a card reader. That’s not a problem because they work with a device you already have.
- Credit card company: Pick the right provider for your business. Keep in mind that costs and transaction fees vary.
- Secure device: Protect your device by installing the newest updates of your mobile operating system. Always lock the device with a password and use apps only from trusted sources.
- Set up: Most payment services send a free card reader attachment to your device after signing up. After receiving the reader, it is likely you will need to download an app to set up shop.
- Promote: Let potential customers know that your business has cashless payment options. Use signage, social media or your website to spread the word.
Mobile card payment processing is a good investment particularly for small businesses.
It allows customers to pay for your products whether you are attending a conference or selling your products on the road.
There is no need to bring a heavy credit card terminal to any trade show because you want to receive payment from customers.
A mobile credit card reader gives you less stress by allowing you to make more money.
When choosing a mobile credit card provider for your business, always consider the general fees, security measures in place and user functionality.
Before settling down with a credit card reader that you think is the right fit for your business, get in touch with different providers first.
It is a good idea to call these card reader providers and ask relevant questions that pertain to your business.
Make sure you always go through user agreements and contracts laid out in front of you, Ensure that you totally understand the processing fees and overall costs involved. Confirm how long the contract will stand, you do not want to be stuck in a contract when you no longer want to stay.